SMRT Q1 Earnings Call: Strategic Restructuring Amid Revenue Decline and Leadership Transition

Smart home company SmartRent (NYSE:SMRT) reported Q1 CY2025 results beating Wall Street’s revenue expectations, but sales fell by 18.1% year on year to $41.34 million. Its non-GAAP loss of $0.05 per share was significantly below analysts’ consensus estimates.

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StockStory’s Take

SmartRent’s first quarter results were shaped by ongoing internal restructuring and a deliberate shift away from hardware sales in favor of recurring software revenue. Interim CEO John Dorman highlighted the company's focus on streamlining operations, breaking down organizational silos, and strengthening its sales and customer success teams, noting, "We have shifted our focus and technology investment away from developing and selling our own branded hardware components." Management acknowledged that execution challenges have weighed on performance, especially as hardware revenues declined, but pointed to sustained high customer retention and SaaS revenue growth as validation of the core platform's value proposition.

Looking ahead, management emphasized that 2025 will be a year of rebuilding the company’s foundation, with the primary goal of achieving sustainable growth in software-as-a-service (SaaS) revenue and returning to profitability. Dorman suggested that the timing of a noticeable positive inflection will depend on ramping up new sales talent and broader macroeconomic factors impacting customer investment cycles. He explained, “Our products have a long sales cycle that is tied in with the capital investment cycle of our major customers, so there remains some degree of uncertainty as to the timing for this year.” The company is also actively seeking a permanent CEO, with the intention to continue executing its current strategy during the transition.

Key Insights from Management’s Remarks

Management attributed Q1 results to its strategic transition from hardware sales to a recurring SaaS model, ongoing operational restructuring, and the impact of leadership changes.

• Go-to-market reorganization: The company completed the initial phase of rebuilding its sales organization, led by Chief Revenue Officer Natalie Cariola, and is still hiring for customer success roles to better support customers throughout the product lifecycle.
• Operational restructuring: SmartRent has broken down previous organizational silos and consolidated customer-facing functions, aiming to create a more scalable and customer-centered support system. This restructuring is expected to improve efficiency and responsiveness.
• Shift in revenue mix: Hardware revenue declined as SmartRent intentionally reduced its focus on hardware sales. Instead, SaaS revenue grew 17% year-over-year, reflecting increased average revenue per unit and strong customer retention rates above 99.9%.
• Cost reduction efforts: Over $10 million in annualized cost savings have been executed, with the impact expected to become more apparent in the second half of the year. Management noted these savings are part of a broader initiative to improve cash flow and accelerate the path to profitability.
• Leadership transition and board changes: The company is in the final stages of its CEO search after a rapid leadership change, and has strengthened its board with new members experienced in scaling recurring revenue businesses. The goal is to ensure operational alignment and accelerate strategic execution.

Drivers of Future Performance

SmartRent’s outlook is driven by efforts to grow SaaS revenue, improve operational efficiency, and mitigate external risks such as tariffs and market cycles.

• SaaS revenue expansion: Management expects continued growth in recurring SaaS revenue to drive long-term value, supported by a larger sales team and improved customer engagement processes. The shift away from hardware aims to build a more stable and predictable revenue base.
• Operational efficiency and cost control: The full benefit of the recent $10 million cost reduction initiative is expected to be realized in the second half of the year, with management stating that these savings will support progress toward adjusted EBITDA profitability. Further efficiencies are being sought through process improvements and infrastructure optimization.
• External risks and mitigation: Recently announced tariffs on imported hardware components may create cost pressures later in the year. The company is exploring changes to manufacturing locations and working with suppliers to minimize tariff impacts, but acknowledges uncertainty given the fluid nature of trade policy and broader macroeconomic conditions.

Catalysts in Upcoming Quarters

Looking forward, the StockStory team will be monitoring (1) the pace at which SaaS revenue becomes a larger share of the business, (2) signs that the expanded sales and customer success teams are boosting new bookings and client engagement, and (3) how effectively SmartRent mitigates cost pressures from tariffs and executes its cost reduction plan. The appointment of a permanent CEO and ongoing progress in operational efficiency will also be key markers of execution.

SmartRent currently trades at a forward price-to-sales ratio of 1.1×. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).

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